1.5 - entrepreneurs and leaders Flashcards
What is an entrepreneur?
An entrepreneur is a person who sets up a business.
They take on the risks of new business activity with the I’m of gaining a reward (profit)
What are the roles of an entrepreneur?
- Creating and setting up a business
- Running and developing a business
- Innovating
- Overcoming barriers to entrepreneurship
- Anticipating risk and uncertainty
What are the characteristics of an entrepreneur?
- Someone with initiative
- Hard working
- Creative
- Self confident
- A risk taker
- Resilient
What are the specific skills that entrepreneurs need?
- Communication
- Team working
- Problem solving
- Numerical skills
- Organisation skills
- IT skills
What are some financial motives for setting up a business?
- To earn enough money to support yourself
- to generate profit
What are the 2 different approaches entrepreneurs can have to making profit?
- Profit maximisation - making as much profit as possible, reducing costs and increasing sales revenue
- Profit satsficing - making enough profit, but not pushing to maximise it
What are some non financial motives for setting up a business?
- Independence of running the business
- Flexibility
- Working from home
- Challenging aspect
- To solve an ethical/societal issue
Why might an entrepreneur have to develop into a leader, and what do they need to be prepared to do?
If the business is a success and the business rows then they will need staff, requiring the entrepreneur to develop into a leader
This transition will mean that the entrepreneur needs to be prepared to:
- Delegate responsibility - the entrepreneur will have to delegate responsibility to other members of staff to manage specific functions of the business
- Develop emotional intelligence - emotional intelligence is the ability to identify and manage your own emotions
- Become less reactive - with more staff, the entrepreneur is responsible for a greater number of people and needs to consider what consequences their decisions could have on then people
What is an aim?
An aim is a broad target or goal set by the business for the long term
What is an objective?
An objective is a specific target or goal set by the business in the short to medium term to help achieve an aim
What are some common business objectives?
- Survival - before a business can concentrate on maximising profits, its main objective may be simply survival
- Maximising profit - a business may set profit objectives to act as short ti medium terms goals
- Sales maximisation - can help a business to boost revenue
- Increasing market share - can also help a business to increase revenue
- Inproving cost efficiency - focusing on saving money for the business by reducing unit costs
- Increasing customer satisfaction - a high level of customer satisfaction can lead to increased revenue
What are the different forms of businesses?
- Sole traders
- Partnerships
- Private limited company (Ltd)
- Public limited company (Plc)
What is a sole trader business?
Sole trader businesses are run by an individual.
Sole traders are self employed.
The sole trader has full responsibility for the financial control of their own business and for meeting running costs.
What are the pros and cons of being a sole trader?
Pros:
- Freedom
- Profit
- Simplicity
- Savings on fees
Cons:
- Risk
- Time
- Expertise
- Vulnerability
- Unlimited liability
What is a partnership?
A business can start off as a partnership or develop from a sole trader into a partnership.
The minimum number of owners needed to set up a partnership is two people.
Partnerships have unlimited liability, meaning the owners have shared responsibility for the business’s debts.
What is a private limited company (ltd)?
In a private limited company, the owners have to agree before anyone buys or sells shares.
Often the shareholders run the business.
Ltds have limited liability, so the owners and the business have seperate legal identities.
What is a public limited company (PLC)?
In a public limited company anyone can buy shares in the business - the shares are sold publicly on the stock market.
PLCs also have limited liability, meaning the owners and business are seen as seperate legal identities.
Why and how might sole traders and partnerships become private limited companys?
An entrepreneur can set up their business as an LTD, but many LTDs arise as sole traders or partnerships grow and develop into an LTD.
Becoming an ltd lets the business sell shares, which provides it with more money to use for growth.
However, an ltd has a lot of paperwork, and it can also be harder for a ltd company to borrow money from banks as the owners arent risking their personal assets.
How and why might privat elimited companys grow into public limited companys?
a ltd company that has potential for growth may opt for stock market flotation and transition into a PLC.
Stock market flotation is when a business publicly sells shares on the stock market for the first time.
What are the different types of business?
- Franchising
- Online businesses
- Lifestyle businesses
- social enterprises
What is franchising?
A franchise is an agreement which allows an entrepreneur to use the business idea, name, model and reputation of an established business.
In return, the entrepreneur has to pay the established business an initial fee, plus ongoing royalty payments.
The franchisor is the established business, and the franchisee is the entrepreneur.
Franchising allows the franchisor to grow quickly as most of the costs and risks are taken on by the franchisee.
What is an online business?
Online businesses are businesses that trade through the internet.
They’re relatively cheap and easy to set up, because the overheads and other fixed costs are low.
An online busienss may be an attractive option for an entrepreneur waning a good work life balance.
What is a lifestyle business?
A lifestyle business focuses on profit satisficing to obtain and maintain a desired lifestyle.
The entrepreneur is motivated by having flexibility in what they do and achieving a good work life balance.
These businesses tend to have lower start up vosts and more limited growth
What is a social enterprise business?
A social enterprise is a business thats set up with a core aim to use its profits to benefit society in some way.
They can often get government grants and their social benefits can encourage customers to buy from them
What is a trade off?
A trade off means one thing has to be reduced or given up in order to increase or gain another.
